As you may have expected, gold demand actually shrank in the first quarter of 2012 according to this gold data and the drop was down 5% from the high demands of the first quarter in 2011.

The decrease in gold demand was expected due to import taxes in India and high gold prices, but what is interesting is that gold’s demand value was up 16% year over year. The figure was put at $59.7 billion globally and the Council noted an average gold price up 22% year over year to $1,690.57 for the quarter.

The issue that helped support gold were increased demand in China, as well as continued central bank purchases, and inflows into exchange-traded funds.

China’s investment and jewellery demand reached 255.2 tonnes, up 10% on the previous year’s levels, and China accounted for 30% of the global jewelry demand.  Conversely, jewelry demand was down 19% in India, with Indian investment demand down a whopping 46%.  The World Gold Council predicts that China will become the largest source of demand for gold in 2012.

Central bank buying was 80.8 tonnes with purchasing gains in Russia and Kazakhstan.  Mexico was the largest addition with a single purchase of 16.8 tonnes.

Demand from ETFs and other investment products was 51.4 tonnes worth about $2.8 billion.  The SPDR Gold Shares (AMEX: GLD) site lists that it holds 1,276.6 tonnes with a total value of just over $63.5 billion as of May 17.

Market Vectors Gold Miners ETF (AMEX: GDX) measures the companies which explore and mine the world’s new gold.  Shares are up almost 4% at $41.11 after bottoming out just above $39.00 over the last two days but this mining ETF was actually up at $50.00 as recently as April 2.

JON C. OGG

The move is also weighing on the more speculative silver market.  What is happening is a bit of an identity crisis as the metals markets are currently fighting for relevance. What happens when the shiny yellow metal’s natural purpose as a currency and inflation hedge and even when a risk-on trade is dwarfed by dollar gains and other macro-issues like trading margin requirements and more?  This is called a fight for relevance.

SPDR Gold Shares (AMEX: GLD) is down 0.3% at $150.86 and the Market Vectors Gold Miners ETF (AMEX: GDX) is down 1.1% at $40.51 as almost every single miner and exploration outfit is lower today.  One of the only exceptions of any size is Royal Gold, Inc. (NASDAQ: RGLD) as one of the few gold mining (well, royalties on mining) outfits that is up on the day with its shares up 0.7% at $62.14 but the volume is rather light.

Silver is down as well with the iShares Silver Trust (AMEX: SLV) down 0.7% at $27.22; shares of Silver Wheaton Corporation (NYSE: SLW) down 0.9% at $24.17.

What really has to happen for the gold and silver market to stabilize is perhaps multiple issues.  The dollar has to stop rising so much, the ‘risk-on’ attitude has to return or at least not be so dead, the European meltdown has to stabilize, and/or the PIIGS resolution needs to go at least one or two days without dire news from Greece, Italy or one of the other PIIGS.

Looking at a brief chart and saying that both gold and silver are oversold technically is getting easier and easier to do.  Unfortunately, oversold and overbought readings can go on and on even if trading bounces come based solely on short covering and speculative buying.

JON C. OGG

SPDR Gold Shares (AMEX: GLD) is down 1.6% at $156.50 and challenging the absolute lows not seen since April 4, 2012.  Royal Gold, Inc. (NASDAQ: RGLD) has not held up since earnings and its shares are down almost 4% at $57.84 on the day against a 52-week range of $55.00 to $83.87.  Eldorado Gold Corporation (NYSE: EGO) is performing the worst of our tracked gold names with a drop of 5.3% at $12.14, and be advised that is a new 52-week low as the prior range was $12.44 to $22.12 over the last 52-weeks.

iShares Silver Trust (AMEX: SLV), the ETF tracking the true’ Devil’s Metal of silver, is down 2.2% at $28.56.  Silver Wheaton Corporation (NYSE: SLW) can always be counted on for volatility and its shares are down almost 3% at $26.65 against a 52-week range of $25.84 to $42.50. Hecla Mining Co. (NYSE: HL) remains very troubled and very challenged and shares are down again after earnings as revenue and earnings fell hard, despite it maintaining its normal dividend and announcing up to 20 million shares for a buyback plan with proceeds over the next 24 months.  Hecla shares are at a new 52-week low of $3.82 against a prior 52-week range of $3.87 to $8.82.

iPath DJ-UBS Copper Total Return Sub-Index ETN (AMEX: JJC) is down with copper as the anti-growth trade seems to still be winning.  Shares are down 2.1% at $47.00 against a 52-week range of $38.99 to $59.06.  Southern Copper Corp. (NYSE: SCCO) is down 2.2% at $31.50.  This is a drop due to the slowing growth of the emerging world on top of a slower Europe.

Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) remains challenged and its shares are down 2.5% at $35.48 against a 52-week range of $28.85 to $56.78.

With the S&P 500 Index down 0.6% at $1360.00, the go-to assets for risk-on and for hiding out are not working.  With stocks lower it looks like investors are flocking to the safe haven of bonds for the “Sell in May and go away!” theme.  The 30-Year Treasury yield of 3.03% looks to be the lowest long bond yield since February 28, 2012.  The 10-Year Treasury is now yielding just under 1.85% and that appears to be the lows not seen since the start of this last February.

The stock chart from stockcharts.com below on the “GLD” should show you just how bad the gold charts are looking.  If those old lows do not hold, some technicians are going to be calling for a firmer end in the gold trade while other chartists will be telling you a major bounce is coming.

JON C. OGG

The company owns shares of production in mines operated by Barrick Gold Corp. (NYSE: ABX), Kinross Gold Corp. (NYSE: KGC), Newmont Mining Corp. (NYSE: NEM), Goldcorp Inc. (NYSE: GG), and Pan American Silver Corp. (NASDAQ: PAAS) among many others. The company gets a portion of production without the impact of rising costs on production, costs which have bedeviled the miners for some time now.

For the company’s third quarter EPS came in at $0.44 versus a consensus estimate of $0.45. Revenues rose to $69.6 million, compared with an estimate of $69 million. Royal Gold also reported an increase in its gold reserves this morning, from a previous total of 83.9 million ounces of gold and 12.4 billion ounces of silver to 84.5 million ounces of gold and 1.2 billion ounces of silver.

After applying the company’s royalty participation formula, Royal Gold claims its precious metals reserves increased 19% on a gold equivalent basis from December 2010 to December 2011.

The consensus estimate for 2012 EPS is $1.83, growing to $2.32 in 2013. The company’s dividend yield is just 1%, and an increase to the annual $0.15/share dividend would probably help the stock more than another gold strike.

Compared with the SPDR Gold Shares ETF (AMEX: GLD), Royal Gold comes up a little short, with five-year share-price growth of 101% compared with growth of 138% for the ETF.

Royal Gold’s shares hit an all-time high last September near $84 and it’s trading today at $59.65, down about -2.3% from last night’s close. The 52-week range is $55.00-$83.87. Year-to-date shares are down -11.6%, even after a jump above $75/share following a January at-the-market purchase of 4 million shares by Goldman Sachs. Shares could be available at a bargain price real soon now.

Paul Ausick

The price of gold rose 8.6% sequentially, nearly double the 10-year average of 4.5%. Positive volatility came in at 21.8%, while negative volatility came in a 16.4%.

Perhaps most interesting is the lack of correlation between equity and gold prices:

Despite higher than average short-term correlations to equities and other risk assets during the quarter, gold’s performance remains independent of risk asset performance. Regression analysis shows that gold may, at times, move in the same direction as equities, but these moves are almost always related to other macro factors, such as, gold’s negative correlation to the US dollar.

The World Gold Council’s report is available here.

The SPDR Gold Shares ETF (AMEX: GLD) is down -0.5% today at $159.46. For the year, the fund is up about 4.9%.

The charts have turned ugly for gold and silver and it bleeds right back to what Carter Worth of Oppenheimer said in mid-March about gold going back to $1,500.00.  Our take is that gold is currently suffering from identity crisis: it is not an inflationary nor a dollar hedge, nor is it proving to be the risk-on asset that investors, traders and speculators had been hoping it was.

Today’s prices on gold and silver matter if you are a pure chartist.  If the prices fail to hold here, gold has another $100 or so in downside and silver could see another 10% easily come out of its still-elevated price.  The iShares Silver Trust (NYSE: SLV) and the SPDR Gold Shares (NYSE: GLD) are experiencing different forms of chart failures right now.

The Gold Trust failed its 50-day short-term test last month and it has now been proving to fail on its 200-day moving average test for the longer-term outlook.  If the GLD does not get a bounce soon, there could be dead air down to $152 or so before technical buyers start sniffing again.

Be sure to see the Stockcharts.com charts below.  The Silver Trust failed its 200-day for longer-term investors back at the end of February and the beginning of March, but its short-term chart was failing at the 50-day moving average back to mid-March.  If this Silver Trust share closes under $30 and hangs out there for long, there is really a bunch of dead air down to $28 or even $27 before technical buyers will start sniffing.

Before you think that the end will never come, Kitco’s Allen Sykora noted today in a longer presentation, “analysts and traders suspect that the market will find some kind of footing before long.”  As we always say, charts matter but they are often corrected by a whole host of excuses as to why they did not work in a particular instance.

The weakness in metals is turning the key gold shares into value traps rather than value stocks.  The $41+ billion dollar in value of Barrick Gold Corporation (NYSE: ABX) is even down 4% at $41.21 and that is $1.00 under its prior 52-week low.  A 4.3% drop in the Market Vectors Gold Miners ETF (NYSE: GDX) down to $46.65 is down $1.40 under its prior 52-week low of $48.05.  And silver is proving to be the devil’s metal for Silver Wheaton Corporation (NYSE: SLW) with a 4.2% drop to $31.30, but its 52-week low does not come into play until $25.84.

This is a difficult time to play a chartist in gold and silver.  The underlying theme is that both metals are weak and could get much weaker.  We usually prefer more fundamental analysis and the fundamental analysis is not supportive either.  If no more easing measures are going to be invented, then the dollar’s rise against the Euro will only help put pressure on gold and other commodities.  And more specifically, investors as of today are not able to successfully claim that gold is a hedge asset nor that it is a risk-on asset worth buying.

Stay tuned.  Maybe silver is not the only devil’s metal.

JON C. OGG

Chart provided by Stockcharts.com:

Faber also noted in the Bloomberg interview that investors should be very careful at this stage because he believes that earnings may begin to disappoint and also that profit margins could deteriorate.”  He called the economy as having bottomed out but also said that growth is far from robust.

On the broader stock market Faber said, “I’m not ruling out that stocks can continue to go up but I doubt they will go up at the same rate as the first quarter. And if you look at the technical under underpinnings of the market, they have deteriorated… we have an overbought condition in the market if we measure the number of stocks above the 50-day and 200-day moving average.”

Gold investors who own the SPDR Gold Shares (NYSE: GLD) may want to note that Faber is now not recommending more gold purchases and is only recommending to hold current positions.  Faber noted, “”As you know, I have been very positive about gold and I still accumulate gold every month. But I think that we had an intermediate peak at $1921 on September 6 of last year. Then we dropped sharply to $1,522 an ounce on December 29, 2011. Since then we’ve had a feeble recovery. I think that the correction period is not yet over. I’m not selling my gold because I don’t trust governments and I don’t trust the Federal Reserve, nor would I trust the ECB or other money traders in the world. They are all going to print money. I still recommend to hold gold.”

Today’s Bloomberg interview may still seem a bit less-doom with only a light boom.

FULL BLOOMBERG INTERVIEW

JON C. OGG

And sometimes, gold just trades around its charts.  Yesterday we showed how many of the key gold mining stocks were trading at 52-week lows and were starting to look like bargains for patient investors.

Carter Worth of Oppenheimer was on CNBC Thursday night offering some price action in gold by reading the charts.  When it came to gold, Mr. Worth gave a one-word summary that leaves no room for interpretation: “Terrible!”  Worth talked about the 150-day moving average turning down and awful relative strength.  His target as of now: $1,500 on gold.

With it being late on Friday, gold is down about $1.90 per ounce at $1,655.40, so Worth sees another 10% drop in the price of gold.  While he talked about hedging with miners, a 10% drop in gold would likely not help out the Market Vectors Gold Miners ETF (NYSE: GDX) even if it is up $0.05 at $50.19 on a day when gold is down.  If the gold market does go back down to $1,500 per ounce, the same corresponding move would be expected in the SPDR Gold Trust (NYSE: GLD) and it is down 0.3% at $160.80 today.

JON C. OGG

Read The 10 Largest Hedge Funds in America

What is even more amazing than the funds’ individual size is the size of the hedge fund world. In the U.S., funds that had $1 billion or more in assets cumulatively had assets under management of more than $1.3 trillion. Well over $1 trillion of those assets tracked were distributed in New York, Connecticut and Massachusetts.

The industry may be huge, but it is not stable. That’s because so many funds take such outsized risk to grow more rapidly than their competitors. Thousands of funds closed in 2008 after the fall of Lehman Bros. In what was probably the worst quarter in the industry’s history, Hedge Fund Research reported that 700 U.S. funds closed in the third quarter of that year. The funds not only lost money on investment, but also could not repay loans taken from banks that gave them leverage to help increase their asset bases.

The surge in the stock market and improvement in the economy lifted the hedge fund industry back toward record levels last year. According to HFR, the number of new funds rose to 1,113 last year from 935 in 2010, the most since 2007 when 1,197 were counted. Obviously, the success of the business is based to a large extent on the health of the economy, although some of the funds on this list have done well enough to defy that lesson.

A recent report from Absolute Return lists U.S. hedge funds according to their assets under management as of January 2012. A look at the top 10 hedge funds reveals several rather well-known names, but also shines a light on several completely unknown ones.

24/7 Wall St. examined the top 10 hedge funds and outlined their respective units. We also provided the funds’ investment strategies and included some of their top holdings if available.

Barrick Gold Corporation (NYSE: ABX) is up 1.2% at $43.84, but its 52-week trading range is $42.50 to $55.95.  The market value is still almost $44 billion.  Goldcorp Incorporated (NYSE: GG) is up only $0.03 at $44.48 but its 52-week trading range is $41.91 to $56.31.  Goldcorp is still worth nearly $36 billion today.  Newmont Mining Corporation (NYSE: NEM) is down around $54.15 after a $0.15 drop on Thursday and the 52-week trading range is $50.16 to $72.42.  It is still worth more than $26 billion and it has a 2.6% dividend yield.

To show that these large players are not alone, the Market Vectors Gold Miners ETF (NYSE: GDX) is up 0.5% at $50.34 but the 52-week trading range is $49.22 to $66.98.

Gold itself is up almost 1% at $1658.90, but that is down from about $1,780 at the end of February and down from above $1,700.00 just last week.  If you just look at gold via the SPDR Gold Trust (NYSE: GLD), it is up 1% at $161.30 and the 52-week range is $136.25 to $185.85.  The “GLD” is at an important juncture on its chart if you take a look at the stockcharts.com chart below.

JON C. OGG